Greenwashing on Trial

Does Nike have a First Amendment right to publicly claim that it is a leader in fighting sweatshops -- or is that false advertising? The California Supreme Court may soon decide.

| Fri Feb. 23, 2001 4:00 AM EST

In a lawsuit that could have far-reaching implications for corporate "greenwashing" campaigns, a San Francisco man will soon take on Nike Inc. over its public claims about conditions in its Asian factories -- factories which the company's critics call sweatshops.

Marc Kasky, a longtime environmental activist, is charging that the Oregon-based athletic apparel company's public disclaimers about working conditions in those factories amounted to false advertising under California's consumer-protection laws. His suit has attracted a long list of suporters, including California's Attorney General. Nike, however, has so far convinced a trial judge and an appellate court that it simply engaged in Constitutionally protected free speech. California's Supreme Court will decide the issue in the coming months.

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"If this case is successful, it could undermine the greenwashing strategies of a lot of corporations that attempt to promote a positive environmental or social image to undermine their critics and minimize the damage done to their brand," says Joshua Karliner, executive director of CorpWatch, a corporate watchdog group.

In the mid-90s, Nike officials launched a public relations counter-offensive against charges that workers in its Asian factories were subjected to dangerous chemical exposure, physical abuse, and substandard wages. Nike sports marketing director Steve Miller, for example, wrote to university presidents and athletic directors in June 1996 to reassure them Nike was still a brand their teams could wear proudly. The company's subcontractors, he claimed, were obliged to follow "government regulations regarding minimum wage and overtime as well as occupational health and safety, environmental regulations, workers' insurance, and equal opportunity provisions."

Other statements came as news releases or letters to newspaper editors. "During the shopping season, we encourage shoppers to remember that Nike is the industry's leader in improving factory conditions," read a letter Nike communications director Lee Weinstein sent to the San Francisco Examiner in December 1997. "Consider that Nike established the sporting goods industry's first code of conduct to ensure our workers know and can exercise their rights."

Nike's happy talk started sounding hollow, however, in 1997, when someone leaked a 1996 Ernst & Young audit, commissioned by Nike itself, of one of its Vietnamese factories, documenting a range of unsafe worker conditions from exposure to toxins such as toluene and acetone to lack of protection against high-decibel noise. (Nor is Vietnam the only place where the company's workers have complaints: Just this week, another Nike-funded study found evidence of physical and verbal abuse and sexual harrassment at nine of its contract factories in Indonesia.)

Kasky and attorney Alan Caplan, who helped nail shut the coffin of the Joe Camel cigarette ad campaign, seized the opportunity. They filed a lawsuit in April 1998, claiming that Nike had engaged in unfair business practices by falsely advertising its Asian labor conditions. California's broad consumer-protection laws make the state's courts a haven for such lawsuits -- a plaintiff need not prove that he or she personally suffered injury, only that there was a likelihood of deception.

As evidence, Kasky and Caplan paired a long list of labor and human rights violations at Nike's Asian facilities with a long list of Nike's statements describing good working conditions. Nike had claimed that the "average line worker's wage in Asian subcontracted facilities is double the government-mandated minimum;" the lawsuit cited the audit as finding that the average wage was $45 per month, while the minimum wage was $40. Knight had written to The New York Times in June 1996 claiming Nike "provides free meals, housing and health care" to factory workers; the lawsuit cited Vietnam Labor Watch's finding -- gleaned from workers' pay stubs -- that Nike workers were forced to pay nine cents for their lunches. And so on.

The issue essentially boils down to whether Nike's public statements can be considered product-touting advertising, in which case they are subject to truth-in-advertising laws, or whether they are simply public statements, in which case they are protected by the First Amendment. The court's ruling on this question could have implications for the many companies that use similar feel-good promotional campaigns to polish their images without directly hawking products. Chevron's "People Do" campaign, for instance, shows the oil giant's workers going the extra mile to protect eagles and baby sea turtles, and Royal Dutch/Shell has taken out ads on this very Web site professing its affection for the environment.

Kasky says he wants to make an example of Nike. "The main thing for me was picking someone who made such a point out of being the role model for other corporations," he explains. "If someone of this size ends up losing or compromising or settling, it will be a signal to others."

His lawsuit seeks to force Nike to create a court-approved public information campaign, and to surrender millions in profits obtained with the help of its allegedly false advertising campaign. But San Francisco Superior Court Judge David Garcia dismissed the case in 1999, accepting Nike's argument that its statements were constitutionally protected. The California Court of Appeal agreed last March, with appellate Justice Douglas Swager calling Nike's statements "part of a public dialogue on a matter of public concern within the core area of expression protected by the First Amendment.

"The fact that Nike has an economic motivation in defending its corporate image from such criticism does not alter the significance of the speech to the 'listeners,' the consumers, or other members of the public concerned with labor practices attending the process of economic globalization," Swager wrote.

Caplan is ready to argue otherwise to the California Supreme Court.

"Nike would like to blow up their statements into a highfalutin' public debate on globalization when really it's much simpler than that -- it's specific statements about how their specific products are made," he says. Affirming the lower courts' rulings would spell doom for truth in image advertising, he warns. "Even though they're lying, they could say they're taking part in a public debate."

Kasky is being backed up in court with amicus briefs from the Sierra Club, the California Labor Federation/AFL-CIO, and state Attorney General Bill Lockyer, among others. "Image advertising is properly viewed as a form of commercial speech ... and the use of deceptive statements of fact about one's own operation is not entitled to First Amendment or state constitutional protection under any legal theory," says the attorney general's brief.

Nike, for their part, has the ACLU of Northern California's backing. "For us it is simply about free speech, pure and simple, no elaboration necessary," says Nike spokesman Vada Manager. David Brown, Nike's lawyer, says he's confident the court "will see that the statements of Nike about which the plaintiff complained were part of a large public debate about globalization in emerging countries."

The stakes, both sides agree, are high. "This," says Caplan, "is a case that's important for every company that advertises, period."

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